Needham: Spectranetics Isn't Just A Buy, It's Now A 'Strong Buy'

In a report published Tuesday, Needham analyst Mike Matson upgraded the rating on Spectranetics Corp SPNC from Buy to Strong Buy, with a price target of $24. The analyst believes that the stock is significantly undervalued and there are various positive catalysts that could drive upside.

The analyst believes that the company's updated guidance is conservative and that Spectranetics' 2H15 results would beat the Street expectations.

"We also expect SPNC to guide conservatively (potentially below consensus) for 2016 as well but we expect investors to tolerate this, assuming that SPNC beats in 3Q15 and 4Q15," Matson stated.

Spectranetics had announced in March that it intended to hire a new CFO, following which the current CFO, Guy Childs, would serve as a Vice President at the company, with his responsibilities including investor relations, treasury and financial planning.

According to the Needham report, "Since SPNC is now five months into its search for a new CFO, we think that an announcement could occur soon. If SPNC hires a well-regarded CFO we think it could serve as a positive catalyst and help begin to reestablish management credibility."

The anticipated launch of the company's Stellarex drug coated balloon in 2017 is also expected to drive the shares up. Spectranetics has completed enrollment for the ILLUMENATE pivotal trial for Stellarex, and the analyst expects the company to file with the FDA on completion of a neo-year follow up in fall 2016.

"We expect the release of the ILLUMENATE data and the PMA submission to serve as major catalysts in 2016, and we expect SPNC shares to move higher in advance of the US Stellarex launch," Matson elaborated.

The fact that members of the management have been buying shares since the share price dipped following the announcement of the 2Q15 results lends support to the belief that the guidance is conservative and that the stock is undervalued.

"We also believe that SPNC is an attractive asset and could become an acquisition target particularly if its share price continues to languish," Matson added.